John Fonfara

Fonfara Leads Finance Committee in Approving Major Overhaul to the Way Connecticut Funds Cities and Towns

Senate Bill 1 Provides: Property Tax Relief, Car Tax & PILOT Reform, Municipal Aid Increases, New Revenue for Towns, Regional Planning

The General Assembly’s Finance, Revenue and Bonding Committee today approved Senate Bill 1 which fundamentally reforms the way the state funds cities and towns, reforms the Payment in Lieu of Taxes (PILOT) program, provides property tax relief for Connecticut’s families, fixes the state’s broken car tax system, delivers new revenue for towns and promotes regional planning efforts.

“These reforms will bring stability and sustainability to our state and our municipalities,” said Senator John Fonfara (D-Hartford), Senate Chair of the Finance, Revenue and Bonding Committee. “Connecticut deserves a progressive and equitable tax structure that keeps our cities and towns whole and enables us to plan responsibly for the future.”

“This bill will result in quantifiable tax relief for Connecticut’s families and small businesses,” said Senate President Martin M. Looney (D-New Haven). “Senate Bill 1 represents the largest overhaul of our property tax, car tax and Payment in Lieu of Taxes systems in our history. It provides new revenues to cities and towns while at the same time slowing municipal property tax growth. Finally, it facilitates regional economic development planning instead of pitting towns against each other.”

PILOT Reform & Property Tax Relief

• Some towns face a much greater burden due to tax exempt property—they must tax their remaining property at higher levels, a real burden on families and businesses.
• PILOT reform: for the first time, as result of this bill, Connecticut will provide a greater level of PILOT aid to towns with the highest levels of state mandated tax exempt property.
• Preserving PILOT for all towns: All towns will be held harmless at FY 15 levels through FY 16 and beyond. In FY 17, additional aid kicks in for towns most in need.

Car Tax Reform

• The car tax is the most unfair, regressive tax in Connecticut today. Taxpayers in Hartford pay more than six times the tax as a Greenwich resident on an identical car. This is wrong.
• This bill establishes a permanent cap on the car tax in all towns at 29.36 mills.
• This measure will cut property tax bills in half for taxpayers with the highest mill rates.
  • Taxpayers in more than 70 towns will receive a direct tax cut.
  • No municipality will see a revenue loss due to this cap, due to a combination of increased PILOT aid and new local revenues.

A Long-awaited, New Source of Revenue for Towns

• SB 1 provides municipalities with a revenue source other than the property tax.
• 0.5 percent of the state sales tax will be dedicated exclusively to municipalities and regions (Councils of Government or COGs) beginning October 1, 2015.
  • 90 percent of the resulting revenue will be distributed directly to towns
  • 10 percent of the revenue will be distributed to the COGs to support regional services and efficiencies
• Slowing property tax growth—to ensure these new revenues are spent responsibly, and to slow the growth of high property tax rates, SB 1 introduces a new “soft cap” on municipal spending
  • If towns increase spending by more than 2.5 percent or the rate of inflation (whichever is greater), their sales tax revenues will be reduced accordingly

Promoting Efficient Regional Planning

• SB 1 establishes a voluntary revenue sharing option for COGs, to allow member towns to share up to 20 percent of property tax revenues on new commercial and industrial development
  • This provision will facilitate improved regional planning, and coordination rather than divisive competition among towns for development and economic growth